Asian shares fall on US stimulus jitters

ASIAN markets have fallen, with Tokyo leading regional declines with a four per cent plunge after comments from Federal Reserve officials sparked jitters over a likely pullback of the US stimulus.

Tokyo on Wednesday tumbled 576.12 points to 13,824.94, the biggest drop since mid-June, as the US dollar fell sharply against the yen.

Sydney dropped 1.85 per cent, or 94.3 points, to 5,011.3; Seoul fell 1.48 per cent, or 28.29 points, to 1,878.33, and Hong Kong lost 1.53 per cent, or 334.86 points to 21,588.84. Shanghai slipped 0.67 per cent, or 13.72 points, to 2,046.78.

US stocks, which hit new records last week, lost ground for a second day on Tuesday following indications the Federal Reserve will begin tapering off its $US85 billion a month quantitative easing program.

The Dow Jones Industrial Average lost 0.60 per cent, or 93.39 points, to 15,518.74, its biggest point and percentage loss since June.

US trade numbers from the Commerce Department showed a narrowing trade deficit in June, which analysts said points to a likely upward revision to the growth estimate for the quarter, and firm growth in the current quarter.

The chiefs of the Federal Reserve's Chicago and Atlanta branches both said the central bank could begin tapering the stimulus program in September, but stressed that economic growth needed to hold steady or improve.

The comments could be an attempt by the Fed to prepare financial markets for a possible roll-back of stimulus and ensure that valuations are not inflated, said Matthew Sherwood, head of investment market research at Perpetual Investments in Sydney.

"If they do it next month, the wind-back is going to be modest," Sherwood told Dow Jones Newswires, adding that the tapering is more likely to happen in 2014.

The growing speculation also sent the US dollar sharply lower against the yen.

The greenback was changing hands at Y97.10 in Asian afternoon trade against Y97.76 in New York on Tuesday afternoon.

The euro bought $US1.3302, nearly flat from New York, but falling to Y129.44 from Y130.10.

On oil markets, New York's main contract, West Texas Intermediate for delivery in September, was up two US cents at $US105.32 a barrel in afternoon Asian trade. Brent North Sea crude for September shed 29 US cents to $US107.89.

Gold cost $US1,276.75 at 1900 AEST, compared with $US1,293.40 late on Tuesday.

In other markets:

- Taipei fell 1.46 per cent, or 117.62 points, to 7,921.29. HTC rose 1.01 per cent to $Tw150.0 while TSMC lost 1.82 per cent to $Tw97.0.

- Wellington slipped 0.59 per cent, or 27.20 points, to 4,548.30.

Telecom Corp was off 2.16 per cent at $NZ2.26, Fletcher Building eased 0.59 per cent to $NZ8.37 while Air New Zealand was unchanged at $NZ1.42.